Latest Results
Results for the year ended 31 December 2008
TyraTech Inc. (AIM: TYR), a leading independent novel pesticide company for human, animal and environmental health, today announces its full year results for the year ended 31 December 2008.
Operational Highlights
- Received early payment of 75% of multi-million dollar partnership stage milestone from Kraft Foods resulting from successful data and progress with the functional food programme and revised agreement
- Strategic business relationship agreement signed with Terminix International to commercialise certain TyraTech Naturals pest control products in the US, with first product order received and to be launched by Terminix in 2009
- Successful launch and encouraging commercial adoption of TyraTech NaturalsTM Crawling Insect Spray; distribution expanded from two to twelve new commercial outlets in the US
- Expanded commercialization of the WasteSolverTM equipment from the Sustainable Solutions division, resulting in an increased revenue receipt in the first half of 2009 from orders signed during 2008.
Financial Highlights
- Net revenues increased to US$5.9 million from US$5.5 million in the prior period
- Research and development costs increased to US$4.6 million, (2007: US$4.5 million).
- Overall operating expenses increased to US$20.4 (2007: US$18.9 million)
- Net loss before and after tax for the period of US$17.4 million,(2007: US$16.5 million)
- Cash and cash equivalents of US$9.2 million, (2007: US$27.5 million) The projected revenues provided by agreements signed at the end of 2008 and the reduced operating costs provide an adequate base of cash resources to allow the business to develop through 2009.
Post Period Highlights
- Two new Sustainable Solution products, SandSolver and SolidSolver, launched based on our WasteSolverTM technology which are expected to be immediately revenue generating
- Received first US patent protecting the core technology platform in March 2009
- TyraChem joint venture for the use of TyraTech pest control products for plantation crop agriculture and incorporating in plastic material signed with Chemplast International in January 2009
Commenting on the Group's Final Results, Douglas Armstrong Ph.D., Chief Executive Officer of TyraTech, said:
“TyraTech has made significant progress in 2008 and already in 2009 to establish the commercialization base for growing product revenue, particularly with new partnerships and distributors that have strong market channels and resources. This, coupled with substantial progress in bringing our technology to the commercial product level, means the Company can look forward with confidence to delivering increased revenues in 2009.”
Chairman's Statement
TyraTech continues to emerge as a leading cleantech pesticide company, putting nature to work through our unique technology, for the development of efficacious proprietary insecticide and parasiticide products made using our proprietary natural plant derived, potent and safe active ingredients. Our products, the first of which are already on sale in USA and India, will address a diversity of market opportunities totaling over US$32 billion with products for:
- People and pet friendly control of insects in our homes and businesses
- Safer protection of our food crops and plants from insects, worms and fungal diseases
- Prevention of parasitic infections in people and animals
- Reducing ground water pollution and depletion of our natural peat bogs
There is a worldwide movement toward safe pesticides. The European Union is adopting legislation to ban dangerous pesticides; a reduction of 60% since 1991. The consumer is now demanding safer pesticides for use in the home around children and pets, as well as less harmful pesticide residues on fruit, vegetables and cereals. In addition, both the US and Canada have been legislating to reduce consumers access to hazardous substances.
Against this backdrop, TyraTech has developed powerful natural products for the effective control of insects and parasites that provide a new level of safety for people, animals and the environment. We use a proprietary scientific process that targets sensitive receptors found on invertebrates, but not on humans or animals, to develop potent natural products that are as effective as, or more effective than the existing synthetic chemical options.
TyraTech recently received its first US patent protecting our core technology platform. The technology has produced a pipeline of products with a clear competitive edge and has allowed us to deliver the innovative partnerships such as our exclusive strategic business relationship agreement with Terminix International, the largest professional pest control company in the world, for new TyraTech Naturals pest control products, and our relationship with Kraft Foods Inc., the world's second largest food company with annual revenues of approximately $40 billion and sales in more than 150 countries, for the development of foods that can aid in the health of people living in areas endemic with intestinal parasites.
We remain focused on developing further new partnerships that can provide the appropriate market access and resources to take our technology to our target customers in high value markets. TyraTech has recently formed a very exciting new joint venture – named TyraChem – that provides an immediate channel to the large banana and pineapple agricultural market, along with bringing in a new technology capability that should lead to a number of new products.
In 2008 we clearly demonstrated the power of our proprietary development platform to develop new TyraTech natural technology for products that are exempt from the US Environmental Protection Agency (EPA) regulations developed for chemical pesticides. With this proven ability to produce products that are either contact killers or repellants for the target pests, we will continue to deliver high value applications that disrupt the traditional market, as well as more traditional applications.
Finally, our Sustainable Solutions business has made steady progress with its new product introductions. 2008 served to build the market awareness of this new capability, and build the customer pipeline with a number of recent orders for the WasteSolverTM equipment. The results of this commercial activity will begin to show in the reported revenues for the first half of 2009. We intend to continue to develop this business as a material asset of TyraTech throughout 2009.
The Board of Directors is looking forward to further progress in 2009 and to building shareholder value, as the Company is well positioned for increased revenues resulting from:
- Our first products now being commercialized
- A strong product pipeline to address diverse pesticide markets
- High value partnerships in place with market leaders such as Kraft Foods and Terminix
- Proprietary development platforms ongoing discovery of new compounds
- Our Sustainable Solutions division expanding near term sales leads
In April 2008 David Szostak, Chief Financial Officer at XLTechGroup Inc., was appointed to the Board of TyraTech as a Non-executive Director and Rick Brenner, Executive Director and founding CEO of TyraTech, stepped down from the Board. Rick has continued his day to day responsibilities at TyraTech, currently as General Manager of the Sustainable Solutions Division. The Board thanks him for his considerable contribution to TyraTech as an Executive Board member.
I would like to thank all of the Company's staff for their significant contribution to the success of our Company and look forward to working with them in 2009.
Geoffrey Vernon
Chairman
April 1, 2009
Chief Executive Officer's Review
Introduction
2008 was a year of material advances in terms of TyraTech's technology, products and commercial channels. Firm foundations have been laid to grow TyraTech into a profitable company. In addition, we have successfully demonstrated that our core technology platform can generate market-changing products: targeted pest control products that are safe for people, animals and the environment.
This year we report our first full operational year results since the IPO in June of 2007. Whilst gross revenue for 2008 was slightly down on 2007, at $5.9 million (2007: $6.0 million), our investments into and successes with product development, sales and marketing during the year 2008 resulted in very material value growth events that have positioned the Company for important increases in revenues for 2009.
TyraTech's Products
During 2008 we expanded the outlets for our first released product, TyraTech Naturals™ Crawling Insect Spray. This product is distributed to the institutional and hospitality industry though our leading distributor SYSCO. Since this relationship commenced at the beginning of 2008, it has been expanded from two regional outlets to fourteen by the end of the year. We have also signed distribution agreements with other companies that will expand revenues from these products in other niche markets.
We have made exciting progress with our next generation general purpose insect spray, which has shown great advancements in potency and applications against a broad array of insects that attack homes and businesses. Using TyraTech Naturals active ingredients, this product is also exempt from the EPA's regulations for typical chemical insecticides, allowing rapid market entry. The development of this advanced product demonstrated the power of our technology platform to take new technology from development to finished marketable products quickly. The performance features of this new product provide the stimulus for our new partnership with Terminix who will bring the product into the commercial marketplace.
Our partnership with Arysta Life Science in the agricultural market in North America has continued to develop well with Arysta completing successful field trials of TyraTech Naturals products. Arysta is now formalizing launch plans for the lead products, and we are in discussions to expand the existing relationship. Given the competitiveness of this market and the stage of the launch plan, we are not able to give more specific detail at this time, but expect this relationship to show important visible progress in 2009.
Stimulated by the successful operations of our lead demonstration farms, the orders for the Sustainable Solutions WasteSolverTM product significantly progressed by the end of 2008 with multiple purchase contracts. These units will be shipped in the first half of 2009, with commensurate revenue reported. In addition, two new products, the SandSolver and SolidSolver, have completed development and will be introduced in early 2009. These products are expected to broaden the range of dairy farms, addressing both smaller and more specialized farms' market needs.
Overall, during 2008 TyraTech has created and proven the internal structures needed to expand our product line and channels. This momentum will continue into 2009 with plans for new product releases and expansion of channels in the US and overseas.
Partners
With a number of very different categories of markets available for TyraTech Naturals, partnerships are key to proficiently accessing these opportunities. 2008 was a year of significant partnering momentum. The year ended with the continued progress of the Kraft relationship and two new partnerships were signed over the year end. Subsequent to the year-end we have also initiated negotiations for an expanded relationship with Arysta and we have made the first shipments of our Indian partner's mosquito repellant.
The consumer market represents one of the largest high margin opportunities in pest control. Following our philosophy for innovative approaches to products and markets, we formed a very exciting new alliance with one of the largest pest control companies in the world: Terminix International. This partnership aligns the TyraTech Naturals combination of insecticide potency and safety with Terminix's domestic customer base and the desire for more people and pet friendly control of insects in our homes and businesses.
The Terminix agreement was established to develop and market effective pest control products incorporating TyraTech Naturals technology. Under the Agreement, we will be providing Terminix with a new general purpose insect spray with first shipments taking place at the end of March 2009. This co-branded product will enable Terminix to go to market with additional professional and consumer approaches for inside the home, as well as in office and hospitality industry settings. Terminix provides pest control for over 2.8 million homes and businesses against all types of pests in 48 US states and in 14 countries through its network of 864 service centers worldwide. This collaborative commercialization relationship will combine and leverage Terminix's strong brand and position as a market leader in pest control with our technology and innovation capabilities, and additional markets will be explored for expansion of the partnership.
Our partnership with Kraft Foods to develop new functional food products for the benefit of people living in areas with endemic parasitic disease, continues to progress. This innovative relationship and plan was built around a staged development process that includes participation of both companies working together. The project successfully achieved the first stage completion in 2007 resulting in a multi-million dollar payment to TyraTech. The successful accomplishment of key project objectives in 2008, combined with a mutual desire for some modifications to the original Agreement structure, resulted in the payment of approximately 75% of the second stage milestone to TyraTech at the end of 2008. The companies are working aggressively to complete the second stage, which is expected to occur during 2009.
In January 2009, we announced the creation of a joint venture named TyraChem. The new company was formed with Chemplast (a subsidiary of McNeil International Corporation.), which has been consistently recognized for its development of innovative products since it first revolutionized commercial banana cultivation with plastic resins incorporating pesticides. The formation of TyraChem will utilize Chemplast's market presence, as well as its technology expertise in the plastics arena. These strengths, together with our proprietary potent blends of plant derived pesticides, will enable the development of innovative products which have the ability to protect against synthetic chemical resistant insects and fungi in the agriculture and consumer markets worldwide.
TyraChem will also develop markets for TyraTech Naturals products for direct application in the banana and pineapple field. The control of both insects and fungal disease is a major issue in the banana and pineapple industries whereby one popular approach to protecting growing banana bunches is to envelop the growing bananas in a plastic bag that incorporate insecticides, for which McNeil is currently a global market leader. In addition, both insecticides and fungicides can be directly sprayed on plants to protect both the plant itself, as well as the growing fruit from damage. Years of chemical pesticides usage has resulted in the emergence of resistant organisms. Regulatory limitations in bringing new synthetic chemical pesticides into the market and a general movement to safer and more organic pesticides have opened a significant market opportunity. TyraChem will focus directly on this opportunity with specific products ranging from TyraTech Naturals based plastic banana tree bags to crop insecticide and fungicide sprays.
The level of interest across this industry is high as the TyraTech technology has the potential to address a number of key challenges facing fruit exporters. Key benefits to the industry include improved crop yield and quality of fruit, a reduction in the use of synthetic pesticides and progress towards more sustainable and safer production practices. Under the terms of the 50:50 joint venture, Chemplast will provide all the up-front development funding of which 50% will be reimbursed through a preferential distribution from the joint venture's profits.
In 2008 we strived to establish new channels with resources provided to take our technology to customers in high value markets. Throughout 2009, we will continue to seek out strategic opportunities with partners with the capability to exploit the features of TyraTech Naturals technology and to give us closer access to the customer, thereby obtaining a greater share of the value chain for the benefit of our investors.
Technology
In 2008 we have focused on exploiting the TyraTech Naturals technology and our proprietary development platform as well as rapidly creating new blends and formulations to satisfy market needs. The power of this platform has been demonstrated with the development of three new TyraTech Naturals blends during 2008 which are in active development for new products during 2009. These new compounds are: a new food-safe EPA exempt blend which we have incorporated into the Terminix product, a new blend for the control of fungi in bananas (currently undergoing field trials) and finally, a new blend that is effective against resistant insect pests in the banana markets.
We have established partnerships with specialist formulators to expand the efficacy of TyraTech Naturals technology for plastics and new EPA exempt formulations. We will continue to develop these relationships with the goal of improving the efficacy of products at a lower cost.
Finally, following the year end, we have received our first approval from the United States Patent Office to protect TyraTech's key technology which screens plant derived natural compounds, such as essential oils, to identify pesticide activity. The technology is incorporated into a platform that is also able to characterize the manner in which these natural compounds interact in a synergistic combination to produce highly potent and non-toxic insecticide and parasiticide products that target specific biological receptors found in invertebrates but not in humans and animals. The technology forms the basis of TyraTech's products for the human health, animal health and pesticide markets which target more than $32 billion in sales globally. The patent covers the use of TyraTech's screening technology in the US for a period of 20 years from 24 April 2003.
Outlook and Summary
We believe that TyraTech has reached a major inflection point for growth. In 2009 we will focus on generating revenue from existing partners and products that we have developed during 2008, which we expect to provide additional cash resources for the Company to continue executing its business plan. Furthermore we expect to announce additional expanded commercial channels and partnerships that will leverage our development work to date and continue to better position TyraTech for higher value return.
Finally I would like to thank our employees for their incredible effort and significant contribution to the Company's success in 2008 which has positioned us well for 2009 and beyond.
R. Douglas Armstrong, Ph.D.,
Chief Executive Officer
April 1, 2009
Financial Review
Overview
Results for the year to December 31, 2008 show a successful year in achieving key milestones, bringing products to market and investing in key resources. Net revenues increased to US$5.9 million from US$5.5 million and the operating expenses increased to US$20.4 million from US$18.9 million.
Revenues
The Group achieved major milestones during the year principally from Kraft resulting in payments of US$4.1 million (2007: US$5.2 million); the amounts recognized for revenues during the year was US$4.9 million (2007: US$5.6 million). During the year we also invoiced and recognized US$1.1million (2007: US$ 0.1 million) of product revenues and a revenue debit for sustainable solutions of US$(0.1) million (2007 US$0.3 million credit). Revenue in 2007 was also offset by an amount relating to the fair value of warrants issued to a commercial partner and treated as a sales incentive of US$(0.5) million for which there was no adjustment in 2008.
Cost of Sales and Gross Profit
Cost of sales for the year was US$4.4 million (2007: $2.4 million). This included research and development costs for collaborative revenue projects of US$2.7 million (2007: US$1.4 million), cost of continued insecticide products in the US institutional markets and Indian markets of US$1.0 million (2007: US$0.1 million), cost of sales of Wastesolver in 2007 of US$0.7 million and inventory write offs of US$0.7 million (2007: US$0.2 million).
Operating Expenses
Overall operating expenses increased to US$20.4 million (2007: US$18.9 million) and include non cash compensation expenses relating to founder share grants and options of US$4.1 million (2007: US$4.0 million) and US$0.9 million of provisions for overdue receivables. The net cash expenditure in operating expenses grew 3.1% to US$15.5 million (2007: US$14.9 million). Overall this reflects a full year of the costs related to expansion in the Company's operations after the IPO in May of 2007 and cost reductions undertaken during the second half of 2008 which brought our cash expenditures back in line with the first half of 2007.
Research and development expenditures increased to US$4.6 million (2007: US$4.5 million) and the cash expenditure grew to US$4.2 million (2007: US$3.9 million) after deducting non cash compensation expenses relating to founder share grants and options. General and administrative spending also increased to US$9.4 million (2007: US$8.1 million) and the cash expenditure excluding non cash compensation and provision for overdue receivables grew to US$6.2 million (2007: US$6.0 million), reflecting the full years costs of being listed on the AIM market of the London Stock Exchange. Business Development expenditure also grew to US$6.4 million (2007: US$6.2 million) and the cash expenditure excluding non cash compensation grew to US$5.0 million (2007: US$4.9 million).
Subsequent to the year end the Executive Directors agreed to a reduction in their base salary of 10% for all of 2009.
Other Income and Costs
Finance income decreased to US$0.4 million (2007: US$0.8 million) earned from reduced funds on deposit and declining interest rates in the year which reduced to a weighted average of 3.31% (2007: 4.95%).
The interest expense was substantially reduced to US$0.0 million paid on a capitalized equipment lease from an expense of US$1.0 million paid on debt due to XLTechGroup Inc. which was repaid in 2007 from the proceeds of the IPO.
Changes in the fair value of warrants amounted to US$(1.0) million (2007 US$(0.0) million) and relates to warrants issued to the underwriters of the IPO which were impacted by the significant reduction in the stock price during the year.
In 2007 an arrangement to accelerate payment of the Vanderbilt University licensing agreement resulted in a US$0.5 million loss on extinguishment of the discounted Vanderbilt license liability. Payment of the liability was made through a combination of cash (US$0.5 million) and 65,457 shares of TyraTech, Inc. common stock valued at US$0.7 million.
Results before and after tax for the year were a loss of US$17.4 million compared to a loss before and after tax of US$16.5 million in the previous year.
Balance Sheet
Non-current assets reduced by US$0.1 million. We acquired non-current assets of US$0.4 million (2007: US$0.9 million) made up of US$0.3 million (2007: US$0.7 million) for completion of the fit out of new offices and laboratories to accommodate the expansion of our staff and US$0.1 million (2007: US$0.2 million) for the upgrade of our information technology infrastructure. This was offset by a depreciation charge of US$0.5 million (2007: US$0.2 million) of depreciation.
Current assets show a significant reduction to US$12.2 million (2007: US$29.1 million). Cash and cash equivalents reduced to US$9.2 million (2007: US$27.5 million) from funding the operating loss for the year and increases in working capital. Trade and other receivables increased to US$0.6 million (2007: US$0.5 million) and inventories grew to US$1.7 million (2007: US$0.8 million) with a build of materials to support the growth in revenues for 2009. Prepayments and short term deposits grew to US$0.8 million (2007: US$0.3 million) due to production inventory prepayments for Sustainable Solutions and prepaid expenses for collaborative revenue projects.
Total liabilities decreased to US$2.9 million (2007: US$6.5 million). The accounts payable and accrued liabilities have reduced to US$1.7 million (2007: US$3.8 million) with no provisions for bonuses in 2008 (2007 US$1.2 million), reductions in accrued XLTG expenses (US$0.4 million), and reductions in accrued consulting expenses (US$0.3 million). The deferred revenue has reduced by 25% to US$1.2 million (2006 US$1.6 million) due to the timing and size of milestone payments and when they are recognized as revenue. The deferred revenue outstanding at the end of 2008 is expected to be recorded as revenue during the first half of 2009 as costs are incurred on collaborative research and development activities. The warrant liability relating to warrants issued to the underwriters of the IPO has reduced significantly to a negligible amount (2007: US$1.0 million) due to the significant reduction in the Company's stock price during the year.
There were no changes in the Company's issued shares during the year. During the first half year, the Group received treasury stock in settlement of a loan of US$0.5 million, which was made to fund an unanticipated tax liability of Dr. Armstrong resulting from the conversion of units in TyraTech LLC to common shares in TyraTech, Inc.
Liquidity and Cash Flow
Net loss before and after tax for the year was US$17.4 million (2007: US$16.5 million) including non-cash expenses such as amortization of employee stock awards of US$4.1 million (2007: US$4.0 million), depreciation and amortization of US$0.5 million (2007: US$0.9 million), write-off of inventory US$0.7 (2007: US$0.2 million) and changes in the value of existing warrants of US$(1.0) million (2007: US$0.5 million). The increased operational activity towards the end of the year, including sales and product development, has increased accounts receivable, prepaid expenses and inventory by US$3.1 million (2007: US$1.5 million). There was a decrease in payables and accruals of US$2.1 million (2007: increase US$2.5 million) mostly from the payment of 2007 bonuses in 2008 and recognition of deferred revenues US$0.4 million (2007 US$0.4 million). All this together has resulted in a net cash outflow from operating activities in the year of US$17.9 million (2007: US$10.3 million).
Cash invested in property, plant and equipment (PP&E) decreased to US$0.4 million (2007: US$0.9 million). The majority of the work in fitting out new offices occurred in 2007 with only a small amount incurred in 2008. Costs relating to the new IT infrastructure were split equally between the two years. All of these capital projects are substantially complete.
As noted above, during 2007 the Group issued 5,000,000 shares with the admission of the Group to trading on the AIM market of the London Stock Exchange, for net proceeds of $43.7 million. Part of the proceeds from the issue was used to repay the notes payable to XLTechGroup, Inc.
Cash and cash equivalents were US$9.2 million (2007: US$27.5 million). We invest our cash resources in deposits with banks with the highest credit ratings, putting security before absolute levels of return.
Currency Effects
The Group has no significant overseas currency exposures and does not use financial derivatives to manage currency risk.
Keith Bigsby
Chief Financial Officer
April 1, 2009
Directors' Report
The Directors present their report and the audited financial statements of TyraTech Inc. for the year ended December 31, 2008.
Results and Dividends
The net loss for the year, after taxation, amounted to US$17.4 million against a net loss of US$16.5 million in 2007. No dividends have been declared or paid.
Principal Activities
The principal activity of the Group is the developing and commercializing of proprietary insecticide and parasiticide products which incorporate unique blends of natural, plant oil derived active ingredients.
Business Review
A review of the Group's operations during the year, and the outlook for the future are given in the Chief Executive Officer's Review on pages 6 to 8.
Where the Directors' report (including the Chairman's Statement, Chief Executive Officer's Review and Financial Review) contains forward-looking statements, these are made by the Directors in good faith based on the information available to them at the time of the approval of this report. Consequently, such statements should be treated with caution due to their inherent uncertainties, including both economic and business risk factors, underlying such forward-looking statements or information.
Research and Development
The directors believe that research and product development play a vital role in the Group's long-term success. Research and development expenditure is expensed when incurred and for the year was US$ 7.3 million (2007 – US$5.9 million) and net US$4.6 million (2007 – US$4.5 million) after transferring US$2.7 million (2007: US$1.4 million) for collaborative revenue projects to cost of sales.
Intellectual Property
The Group owns intellectual property and has taken steps to protect this through patent applications, where, as of the date of this report, one patent was issued (2007 – nil) and 22 patents are pending (2007 – 21). The Group's key intellectual property is built around the screening methods for identifying active ingredients for synergistic receptor activation and the active ingredient combinations. The Directors believe that the intellectual property is of significant value to the business.
Supplier Payment Policy
The Group's policy is to settle the terms of payment with suppliers when agreeing the terms of each transaction, or the terms of a continuing trading relationship, ensuring that suppliers are made aware of the terms of payment, and to abide by these terms whenever possible. The creditor days at the year-end were 37 days (2007 – 37 days) for the Group.
Equal Opportunity Employer
The Group is committed to a policy that provides all employees and potential employees with equality of opportunity for selection and development regardless of age, gender, nationality, race, creed, disability or sexual orientation.
Policy on Employee Involvement
Briefing and consultative procedures exist throughout the Group to keep employees informed of general business issues and other matters of concern.
Charitable Donations
The Group has made charitable donations to local charities during the year of US$0.2 million (2007 – US$0.2 million) to educational institutions involved in the development of our technology.
Directors
The directors who served during the year were as follows:
G.N. Vernon
R.D. Armstrong
R.K. Brenner (resigned April 4, 2008)
K.E. Bigsby
A.J. Reade
B.M. Riley
K.D. Noonan
D.P. Szostak (appointed April 4, 2008)
Biographies of the Directors Follow:
Geoffrey Vernon (Non-executive Chairman) was appointed on May 25, 2007. He is Chairman of XLTech Group Inc. and is a former executive director of Rothschild Asset Management Ltd., partner of the venture capital group Advent Limited, and has over 20 years experience in healthcare and life sciences. Dr. Vernon is chairman and/or non-executive director of a number of quoted and privately owned companies in the UK, Germany, Ireland and Israel. He is also a Fellow of the Institute of Directors and one of the first directors in the UK to be admitted as a Chartered Director. He is member of the Audit Committee and chairman of the Nomination Committee.
Doug Armstrong (Chief Executive Officer) was appointed on February 2, 2007 He has over 20 years experience in the assessment and development of biotechnologies, as well as in-depth corporate management experience at public and private biotechnology, medical device and developmental research companies. Prior to his appointment at TyraTech, he was CEO and Chairman of Aastrom Biosciences Inc., which he led from start-up, through development, and a public offering on NASDAQ. He currently serves on the board of VisualSonics Inc. where he earned fees of US$28,600 in 2008 (2007 – US$9,650) which he has retained. He has also served on the boards Nephros Therapeutics Inc., Cytomedix Inc., Zellera AG (Germany), and the Burnham Institute, where he also served as the Executive Vice President. In addition, he has served as a member of the advisory board of Wolverine Venture Fund, and an advisor to Auxol Capital. Dr. Armstrong is a graduate in Chemistry from the University of Richmond, Virginia and he also holds a Ph.D. in Pharmacology & Toxicology from the Medical College of Virginia, at Virginia Commonwealth University.
Keith Bigsby (Chief Financial Officer) was appointed on April 27, 2007. After qualifying as a Chartered Accountant, Mr. Bigsby has had over 30 years of senior financial management and board room experience in the technology sector. He has held senior finance positions across Europe, the USA and the Far East, a significant proportion of which has been as Chief Financial Officer (including for publicly listed companies) most recently at Geotrupes Energy Plc and Tadpole Technology Plc. Prior to this he was for six years the European Regional CFO for Wang and held Regional Finance Director roles in the UK and France for Sun Microsystems. He has a significant background in complex business environments, strategic planning and process re-engineering.
Alan Reade (Non-executive Director) was appointed on May 25, 2007. He is owner of Global Strategy Expression Limited, a consulting and advisory services business in the life sciences industry. From 2000 until his retirement in 2005, he served as executive chairman of Merial Limited, a leading animal health company and joint venture between Merck & Co. Inc. and Sanofi-Aventis. Earlier in his career he was head of global integration at Aventis, where he was in charge of merger integration, and Chief Executive Officer and member of the Global Executive Committee at Rhone-Poulenc Inc. He previously has been a director of Sygen International and IFAH, a global animal health association as well as more than 40 Merial subsidiaries. He is chairman of the Remuneration Committee and member of the Nomination Committee.
Barry Riley (Non-executive Director) was appointed on May 25, 2007. After qualifying as a Chartered Accountant, he joined the Bowater Organization, where he had responsibility for the finance function at several operations. From there he moved to FMC Corporation, the U.S. conglomerate where he had finance and general management responsibilities for a specialty chemical operation, and also oversaw the head office finance function for all UK operations. He joined Proteus International plc in 1995 as Finance Director and was closely involved in the merger with Therapeutic Antibodies Inc. in 1999, which became Protherics Plc where he was Finance Director until 2007. He is chairman of the Audit Committee and member of the Nomination Committee.
Ken Noonan (Senior Independent Non-executive Director) was appointed on May 25, 2007. He was a Partner at LEK Consulting LLP based in London, where he led the firm's life sciences practice in the UK and Europe, with responsibility for pharmaceuticals, biotechnology and in vitro diagnostics until he retired in 2008. He is currently a technology partner at Advanced Technology Partners. Other positions held by Dr. Noonan included Senior Vice President of Corporate Development for Applera Corporation and Vice President at Booz-Allen & Hamilton and head of its European Pharmaceutical Practice. He currently serves on the Board of Orchid Biosciences Inc and Intercept Pharmaceuticals Inc. During his academic career he authored over 50 articles in the cancer biology/cell replication and holds a B.S. from St Josephs University and a Ph.D. in Biochemistry from Princeton University. He is a member of the Audit Committee and of the Remuneration Committee.
David Szostak (Non-executive Director) was appointed on April 4, 2008. He is Chief Financial Officer of XLTechGroup Inc. and PetroAlgae LLC, as well as President of PetroAlgae Inc.. He has over 20 years experience in industry. Other positions held by Mr. Szostak were CFO of Hetra Computer Inc. and Corporate Controller at Extel, Inc.. Mr. Szostak has a Bachelor of Science in Finance at Southern Illinois University, with graduate studies at DePaul University in Chicago.
Directors' Interests
The directors at December 31, 2008 and their beneficial interests in the share capital of the Group, other than with respect to options to acquire ordinary shares (which are detailed in the analysis of options included in the Directors' Remuneration Report) are as follows:
| December 31, 2008 (or earlier date of resignation) Common Shares of US$0.001 each | January 1, 2008 (or later date of appointment) Common Shares of US$0.001 each | |
| G.N. Vernon | Nil | Nil |
| R.D. Armstrong | 543,059 | 602,561 |
| R.K. Brenner | Nil | Nil |
| K.E. Bigsby | 172,161 | 172,161 |
| A.J. Reade | Nil | Nil |
| R.M. Riley | Nil | Nil |
| K.D. Noonan | Nil | Nil |
| D.P. Szostak | Nil | Nil |
There have been no reported changes in the Director's shareholdings in the period from December 31, 2008 to April 1, 2009.
Directors Indemnity Insurance
The Group has taken out insurance to indemnify, against third party proceedings, the Directors of the Group whilst serving on the Board of the Group and of any subsidiary, associate or joint venture. This cover indemnifies all employees of the Group who serve on the boards of all subsidiaries. These qualifying third party indemnity policies subsisted throughout the year and remain in place at the date of this report.
Capital Structure
The capital structure of the Group comprises common shares of US$0.001 each.
There are specific restrictions on the transfer of shares by a key shareholder, Laurus/Valens Group, until June 1, 2009. There are no significant agreements to which the Group is a party that take effect, alter or terminate upon a change in control of the Group following a takeover bid.
Substantial Shareholdings
At March 30, 2009, the Group has been advised, in accordance with DTR 5 (Disclosure and Transparency Rules), of the following shareholdings amounting to 3% or more of the ordinary share capital of the Group.
| Number | Percentage | |
| Laurus/Valens Group | 10,542,681 | 47.9% |
| State Street Nominees | 5,123,799 | 23.3% |
| Vidacos Nominees | 2,341,830 | 10.6% |
| Bank of New York | 2,176,800 | 9.9% |
Auditors
A resolution to reappoint KPMG LLP, a U.S. limited liability partnership, as auditors and to authorize the Directors to determine their remuneration will be proposed at the Annual General Meeting.
Directors' Statement as to Disclosure of Information to Auditors
The Directors who were members of the Board at the time of approving this report are listed on page 13. Having made enquiries of fellow Directors and of the Group's auditors, each of these Directors confirms that:
- To the best of his knowledge and belief, there is no information relevant to the preparation of their report of which the Group's auditors are unaware; and
- Each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Group's auditors are aware of that information.
By order of the board
Geoffrey Vernon
Chairman
April 1, 2009
Statement of Compliance with Provisions of the Combined Code
The Board supports the principles of good corporate governance and in particular the Combined Code on Corporate Governance which is appended to the Listing Rules of the Financial Services Authority (the Combined Code), issued in June 2006. Though the Group as an AIM listed company is not required to fully comply with the current version of the Combined Code on Corporate Governance, the Board is committed to a level of compliance appropriate for a smaller public company. This report is presented in accordance with the relevant provisions of the Combined Code on Corporate Governance (the Combined Code).
The Group now considers that the Chairman, Dr. G.N. Vernon does meet the independence criteria and company is now in compliance with Code A.2.2.
As such, the Board considers that it has maintained an appropriate level of compliance with the provisions set out in Section 1 of the Combined Code for the year to December 31, 2008.
Board of Directors
During the year to December 31, 2008, the Board consisted of a Non-executive Chairman, two Executive Directors and three Non-executive Directors. On April 7, 2008 Mr. Brenner resigned as an Executive Director and David Szostak was appointed as a Non-executive Director.
On joining the Board, all directors received a full induction and have the opportunity to meet with shareholders at the Annual General Meeting.
Biographies of the Board members appear on pages 13 and 14 of this report. These indicate the high level and range of experience, which enables the Group to be managed effectively.
The Board has established three committees in relation to directors' remuneration and audit matters and nominations to the Board.
The membership of all Board Committees has remained unchanged for the year and is set out below:
- Remuneration Committee: Mr. Reade (Chairman) and Dr. Noonan.
- Audit Committee: Mr. Riley (Chairman), Dr. Noonan and Dr. Vernon.
- Nomination Committee: Dr. Vernon (Chairman), Mr. Riley and Mr. Reade.
The Board is responsible to the shareholders for the proper management of the Group. The Board has adopted a formal schedule of matters specifically reserved for the Board's decision that covers key areas of the Group's affairs including overall responsibility for the business and commercial strategy of the Group, policy on corporate governance issues, review of trading performance and forecasts, the approval of major transactions and the approval of the interim management and financial statements, annual report and financial statements and operating and capital expenditure budgets.
The Chairman leads the Board in the determination of its strategy and in the achievement of its objectives. The Chairman is responsible for organizing the business of the Board, ensuring its effectiveness and setting its agenda. The Chairman has no involvement in the day-to-day business of the Group. The Chairman facilitates the effective contribution of Non-executive Directors and constructive relations between Executive and Non-executive Directors, ensuring Directors receive accurate, timely and clear information. The Chairman gives feedback to the Board on issues raised by major shareholders.
The Board evaluates its own effectiveness on an annual basis by measuring performance against a standard set of objectives assessed by each member of the Board.
The Board delegates the day to day responsibility for managing the Group to the Chief Executive Officer who is accountable to the Board for the financial and operational performance of the Group.
The Group regards A.J. Reade, B.M. Riley and K.D. Noonan as independent Non-executive Directors and these Directors constructively challenge and help develop proposals on strategy, and bring strong independent judgment, knowledge and experience to the Board's deliberations. The Independent Directors are of sufficient calibre and number that their views carry significant weight in the Board's decision making. K.D. Noonan is the Senior Independent Director. As Senior Independent Director, he is available to shareholders if they have concerns where contact through the normal channels of Chairman, Chief Executive or Finance Director has failed to resolve matters or for which such contact would be inappropriate.
The Board has 5 regularly scheduled meetings annually with additional meetings to discuss strategy and other pertinent issues organized as necessary during the year.
Prior to each meeting the Board members receive copies of the management accounts and are furnished with information in a form and quality appropriate for it to discharge its duties concerning the state of the business and performance compared to plan. All directors have access to the services of the Group Secretary and may take independent professional advice at the Group's expense in the furtherance of their duties.
The Non-executive Directors meet after each board meeting without the Executive Directors being present.
The attendance of individual directors at Board meetings during the year is set out in the table below:
| Number of meetings | Meetings attended | |
| G.N. Vernon | 11 | 8 |
| R.D. Armstrong | 11 | 10 |
| R.K. Brenner | 2 | 2 |
| K.E. Bigsby | 11 | 11 |
| A.J. Reade | 11 | 11 |
| B.M. Riley | 11 | 11 |
| K.D. Noonan | 11 | 11 |
| D.P. Szostak | 9 | 6 |
Dr. G.N. Vernon and Mr. D.P. Szostak did not attend three meetings and Dr. R.D. Armstrong did not attend one meeting for which conflicts existed with the agenda items.
In accordance with bye laws of the Group, one third of the directors must resign and may offer themselves for re-election. At the forthcoming Annual General Meeting Dr. K.D. Noonan and Mr. B.M. Riley will offer themselves for re-election.
Board Committees
The Remuneration Committee is responsible for establishing and monitoring appropriate levels of remuneration and individual remuneration packages for Executive Directors. No director is involved in deciding his own remuneration. The report of the Remuneration Committee is set out on pages 21 to 25.
The attendance of individual directors at Remuneration Committee meetings during the year is set out in the table below:
| Number of meetings | Meetings attended | |
| A.J. Reade | 5 | 5 |
| K.D. Noonan | 5 | 5 |
| By invitation: | ||
| G.N. Vernon | 5 | 5 |
| R.D. Armstrong | 3 | 3 |
| R.K. Brenner | 1 | 1 |
| K.E. Bigsby | 3 | 3 |
| B.M. Riley | 5 | 5 |
| D.P. Szostak | 2 | 2 |
The Group has an Audit Committee, whose responsibilities include reviewing the scope of the audit and audit procedures, the format and content of the audited financial statements and interim reports, including the notes and the accounting principles applied. The Audit Committee also reviews internal control, including internal financial control, in conjunction with the Board. The Audit Committee will also review any proposed change in accounting policies and any recommendations from the Group's auditors regarding improvements to internal controls and the adequacy of resources within the Group's finance function. The Audit Committee advises the Board on the appointment of external auditors and on their remuneration both for audit and non-audit work, and discusses the nature, scope and results of the external audit with the external auditors. The Audit Committee keeps under review the cost effectiveness and the independence and objectivity of the external auditors.
All directors may attend meetings and at least twice a year representatives of the Group's auditors have an opportunity to meet the Audit Committee at which time they also have the opportunity to discuss matters without any Executive Director being present.
The Audit Committee monitors fees paid to the auditors for non-audit work and evaluates on a case by case basis whether it should put the requirement for non-audit services out to tender. The Group's auditors, KPMG LLP, have been instructed to carry out non-audit work during the year. The non-audit work this year was comprised of tax advisory services. The Audit Committee believes that it is more effective for the auditors to carry out these services and the nature of such work does not impair the independence and objectivity of the auditors. Prior approval is required before such work is contracted. Other firms of advisors were employed during the year for tax compliance services.
A “whistle blowing” policy has been implemented whereby employees may contact the Chairman of the Audit Committee on a confidential basis.
The attendance of individual directors at Audit Committee meetings during the year is set out in the table below:
| Number of meetings | Meetings attended | |
| B.M. Riley | 3 | 3 |
| G.N. Vernon | 3 | 3 |
| K.D. Noonan | 3 | 3 |
| By invitation: | ||
| R.D. Armstrong | 3 | 3 |
| R.K. Brenner | 1 | 1 |
| K.E. Bigsby | 3 | 3 |
| A.J. Reade | 3 | 3 |
| D.P. Szostak | 2 | 2 |
The Nomination Committee is responsible for considering and making recommendations concerning the composition of the Board, including proposed appointees to the Board, whether to fill vacancies that may arise or to change the number of Board members. The appointments during the year did not involve open advertising.
The attendance of individual directors at Nomination Committee meetings during the year is set out in the table below:
| Number of meetings | Meetings attended | |
| G.N. Vernon (Chairman) | 1 | 1 |
| A.J. Reade | 1 | 1 |
| B.M. Riley | 1 | 1 |
| By invitation: | ||
| R.D. Armstrong | 1 | 1 |
| K.E. Bigsby | 1 | 1 |
| K.D. Noonan | 1 | 1 |
Internal Control and Risk Management
The Directors acknowledge that they are responsible for establishing and maintaining the Group's system of internal control and reviewing its effectiveness. The Group is small and the Directors are closely involved in the management of the business. At the beginning of the financial year we identified the key risks that the Group face during the financial year. The Board has since reviewed these risks as part of the strategic planning exercise, considering the likelihood of the risk occurring and the potential impact on the business. The board will continue to review and update the risk management process on an ongoing basis. No significant weaknesses or failings were identified, however, the internal controls are designed to manage rather than eliminate the risk of failure to achieve business objectives and the Board recognizes that any system can only provide reasonable and not absolute assurance against material misstatement or loss.
The Group operating procedures include a comprehensive system for reporting financial and non-financial information to the Directors.
The planning system produces rolling three year strategic plan annually. The first year of the three year plan is a proposed operating budget, phased monthly. These are approved by the Board and forecast updates are carried out quarterly. The financial projections include income statement, balance sheet and cash flows.
At each Board meeting, the Board reviews the actual financial results versus budget and forecast together with other management reports containing non-financial information.
Schedules of financial authority limits detailing management authority limits for commitments in respect of sales orders, capital and operating expenditure are circulated to relevant employees and updated at least annually.
The Board considers that there have been no weaknesses in internal financial controls that have resulted in any material losses, contingencies or uncertainties requiring disclosure in the financial statements.
The Chairman ensures that directors take independent professional advice as required at the Group's expense in appropriate circumstances and all members of the Board have access to the advice of the Group Secretary.
Going Concern
The Company believes that with existing cash on hand, cash expected to be received through existing contracts and the ability to control costs as a result of the Company's cost minimization program implemented in the second half of 2008 that the Company will have sufficient cash to meet its working capital needs through 2009. For this reason the Company continues to adopt the going concern basis.
Internal Audit
The Group does not have an internal audit function. However, the Audit Committee reviews annually the need for such a function and has done so during the year. The current conclusion of the Board is that it is not necessary given the modest scale and lack of complexity of the Group's activities.
Shareholder Communication
It is the Group's policy to involve its shareholders in the affairs of the Group and to give them the opportunity at the Annual General Meeting to ask questions about the Group's activities. This process enables the views of shareholders to be communicated to the Board. In addition, any direct enquiries are dealt with by the Group Secretary and communicated as appropriate to the Board. Other than in exceptional circumstances, all directors, including those newly appointed, attend the Annual General Meeting of the Group, and make themselves available for introductions and answering shareholders' questions. Established procedures ensure the timely release of price sensitive information and the publication of financial results and regulatory financial statements. The Group also maintains a websites, www.tyratech.com, which incorporate corporate, financial, product information and news.
Directors' Remuneration Report
This report sets out the Group's policy on the remuneration of Executive and Non-executive Directors and details Executive Directors remuneration packages and service contracts.
Remuneration Committee
The Remuneration Committee has the responsibility for determining the Group's overall policy on executive remuneration and for deciding the specific remuneration, benefits and terms of employment for Executive Directors. Fees paid to Non-executive Directors and to the Chairman are determined by the Board as a whole and no director is responsible for approving his own remuneration. The Remuneration Committee, in its deliberations on the remuneration policy for the Group's Directors, seeks to give full consideration to the Combined Code. No external advisors were engaged to provide independent professional advice to the Remuneration Committee in 2008 and no changes to Directors remuneration occurred during 2008. Subsequent to the year end the Executive Directors agreed to a reduction in their base salary of 10% for all of 2009.
Remuneration Policy
The policies set by the Remuneration Committee are intended to attract, retain and motivate high calibre executives capable of achieving the Group's objectives, and to ensure that Executive Directors receive remuneration appropriate to their experience, responsibility, geographic location and performance. The Committee's policies aim to align business strategy and corporate objectives with executive remuneration and seek to ensure the appropriate mix between fixed and performance based elements, and between long and short-term goals and rewards.
Executive Directors' remuneration packages are comprised of a basic salary and an annual performance related bonus plan and stock appreciation rights. The Group also provides health care, disability and life insurance and 401(k) matching contribution benefits consistent with all employees of the Group. Total compensation levels for executives are designed to be at least the median level reflecting the levels of performance, experience and responsibility held by each of the External Directors.
Basic Salary
The basic salary of Executive Directors is determined by the Remuneration Committee taking into account individual performance and aims to ensure that remuneration remains competitive with similar companies in terms of size and complexity.
Annual Performance Related Bonus
Each Executive Director is eligible for a discretionary annual bonus based upon the achievement of specific performance targets for the year, determined by the Remuneration Committee. In determining the performance targets and related bonus levels, the Remuneration Committee seeks to align the interests of executives with those of shareholders. Performance related remuneration forms a significant amount of Executive Directors' total remuneration. On target bonus amounts for 2008 were set at 100% of basic salary for Dr. Armstrong and at 50% of basic salary for Mr. Bigsby. No Executive Directors earned bonuses during the year.
Stock Appreciation Rights
Dr. Armstrong and Mr. Bigsby have been granted founder shares in the Group. Since this initial grant of founder's shares, neither has received any additional incentive equity by the end of the year. All Executive Directors and employees are eligible for grants of stock appreciation rights. Stock appreciation rights are granted at the closing mid-market price of the Group's ordinary shares on the day prior to grant and vest over 4 equal annual increments. Currently the exercise of stock appreciation rights granted is not dependent upon performance criteria.
Pension and Other Benefits
Executive Directors' basic salaries are set at levels which are deemed to include adequate provision for pension contributions. Each Executive Director is free to determine the amount of pension contribution payable from salary, given the age of the relevant director and other personal circumstances. Executive Directors are entitled to make contributions from salary into the Group's 401(k) (see Directors' Pension Arrangements below). The Group funds the provision of private medical insurance cover for Executive Directors and their immediate family and Executive Directors participate in the Group's life insurance scheme, which has a lump sum payment in the event of death in service.
Executive Directors' Service Contracts
Dr. Armstrong has entered into a service agreement with the Group, the principal terms of which are that if the Group terminates his employment, other than for good cause, the Group shall pay to him the amount outstanding up to the date of the termination. In addition, if Dr. Armstrong's employment is terminated by the Group without good cause or if he resigns with good reason, the Group shall pay an amount equal to the eighteen months' base salary and bonus, as well as accelerating the vesting of shares which become free of re-purchase obligations in the current and subsequent year after the date of termination. If Dr. Armstrong had been terminated, other than for good cause, at December 31, 2008, the Group would have owed Dr. Armstrong US$1,095,000 (US$1,095,000 at December 31, 2007) (plus unit grants as outlined above) pursuant to his service agreement.
Kerdos Corporate Finance Limited (KCFL) has entered into a consultant agreement for the services of Mr. Bigsby as the Chief Financial Officer of the Group. Mr. Bigsby is entitled to participate in the 2008 Bonus Plan while engaged by the Group. The contract can be terminated without notice by the Group and with three months notice from KCFL.
Non-executive Directors' Letters of Appointment
Dr. Vernon, Mr. Reade, Mr. Riley and Dr. Noonan entered into agreements with the Group on May 25, 2007, which govern the terms and conditions of their appointment as non-executive Directors of the Group. Each appointment is for an initial term expiring upon conclusion of the next annual general meeting of the Group unless renewed at the end of that period for a further 12 month period. Dr. Vernon was entitled to fees totaling
£47,500 for the year payable to Ziggus Holding Limited, of which Dr. Vernon is an employee. Mr. Reade was entitled to fees totaling £35,000 for the year payable to Global Strategy Expression Limited of which Mr. Reade is an employee. Dr. Noonan was entitled to fees totaling £32,500 for the year payable to T. K. Advisory Limited of which Dr. Noonan is an employee. Mr. Riley was entitled to fees of £35,000 for the year payable directly. Mr. Szostak was appointed as a representative of XLTechGroup and received no fees during the year.
In addition to fees, the Company reimburses the independent Non-Executive Directors for all reasonable out-of-pocket expenses incurred.
Performance Graph
The following graph shows the Group's performance, measured by total shareholder return, compared with the performance of the FTSE All Share Healthcare Index and the FTSE AIM Index.
The directors consider the FTSE AIM All Share Index and FTSE All Share Healthcare Index to be an appropriate choice as the index includes the Group.
Aggregate Directors' Remuneration
Directors' Emoluments in US$
| Year | Salary and fees1 | Benefits1 | Bonus1 | Total | ||
| Executives: | ||||||
| R.D. Armstrong | 2008 | 365,000 | 27,464 | - | 392,464 | |
| 2007 | 365,000 | 22,719 | 365,000 | 752,719 | ||
| R.K. Brenner | 2008 | 65,838 | 9,864 | - | 75,702 | |
| 2007 | 213,846 | 22,532 | 213,846 | 450,224 | ||
| K.E. Bigsby | 2008 | 265,000 | - | - | 265,000 | |
| 2007 | 209,096 | - | 104,548 | 313,644 | ||
| Chairman 6 | ||||||
| G.N. Vernon2 | 2008 | 84,734 | - | - | 84,734 | |
| 2007 | 64,169 | - | - | 64,169 | ||
| Non-executive 6 | ||||||
| A.J. Reade4 | 2008 | 64,920 | - | - | 64,920 | |
| 2007 | 47,940 | - | - | 47,940 | ||
| B.M. Riley | 2008 | 59,931 | - | - | 59,931 | |
| 2007 | 46,674 | - | - | 46,674 | ||
| K.D. Noonan3 | 2008 | 56,333 | - | - | 56,333 | |
| 2007 | 43,008 | - | - | 43,008 | ||
| D.P. Szostak | 2008 | - | - | - | - | |
| 2007 | - | - | - | - | ||
| Total | 2008 | $961,756 | $37,328 | $- | $999,084 | |
| 2007 | $989,733 | $45,251 | $683,394 | $1,718,378 | ||
(1) Remuneration amounts are for the 2008 and 2007 period served
(2) Includes beneficial payments to Ziggus Holding Ltd
(3) Includes beneficial payments to T. K. Advisory Ltd
(4) Includes beneficial payments to Global Strategy Expression Ltd
(5) Bonuses were paid in 2008
(6) Payments made in pounds Sterling, at exchange rates to the US Dollar ranging from 1.4769 to 2.0705 in 2008
The benefits in kind represent contributions to medical insurance schemes and the 401(k) pension plan. The share based payment charge for directors' founder shares was US$1,893,663 (2007: US$1,794,894). These amounts have been included within administrative costs. The total directors' compensation is US$2,892,747 (2007: US$3,513,372).
Directors' Pension Arrangements
The Executive Directors can participate in the Group's 401(k) plan and the Group will match any contributions into the plan up to 4% of salary not to exceed US$9,200 in 2008 with a tax deferral limit of US$15,500 and additional tax deferral provisions for employees over 50 years old.
Directors' Share Options
The aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the Group granted to or held by the directors. On the December 31, 2008, the Directors held no options in the Group. Subsequent to the year end on January 16, 2009 Dr. Armstrong was granted 85,883 shares and Mr. Bigsby was granted 63,553 shares at an exercise price of 42.5p and they all vest on the first anniversary of the grant. A further grant of 50,000 shares was awarded to Mr. Bigsby on January 16, 2009 at an exercise price of 42.5p and they vest in four equal annual installments starting on the first anniversary of the grant.
In addition, the shares held by Dr. Armstrong and Mr. Bigsby were granted as founder shares, the shares are restricted and subject to re-purchase at the Group's option at par for a period of 4 years subject to 25% of the shares becoming fully vested on the first anniversary of the grant date and for the following three anniversaries thereafter.
Date Granted |
Number of Shares |
||
| Directors: | |||
| R.D. Armstrong | December 12, 2006 | 602,561 | |
| K.E. Bigsby | April 20, 2007 | 172,161 | |
The market price of the shares at December 31, 2008 was £0.425 (2007 – £4.975) and the range during the year from listing was £0.425 to £4.975.
Approval
The report was approved by the board of directors on April 1, 2009 and signed on its behalf by:
Alan Reade
Chairman, Remuneration Committee
April 1, 2009
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the Group financial statements. The Directors are required to prepare Group financial statements for each financial year which present fairly the financial position of the Group and the financial performance and cash flows of the Group for that period. In preparing those Group financial statements, the Directors are required to:
- Select suitable accounting policies and then apply them consistently;
- Make judgments and estimates that are reasonable and prudent;
- State whether applicable U.S. GAAP have been followed, subject to any material departures disclosed and explained in the financial statements;
- Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
- Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
- Provide additional disclosures to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group. They have a general responsibility for safeguarding the assets of the Group and taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website.
Annual General Meeting
The AGM will be held at the office of Buchanan Communications, 45 Moorfields, London, EC2Y 9AE UK on May 21, 2009 at 12 noon UK time. The Group will convey the results of the proxy votes cast at the AGM.
Keith Bigsby
Group Secretary
April 1, 2009
Independent Auditors' Report
The Board of Directors
TyraTech, Inc.:
We have audited the accompanying consolidated balance sheets of TyraTech, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TyraTech, Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
Orlando, Florida
April 1, 2009
Certified Public Accountants
Consolidated Balance Sheets
December 31, 2008 and 2007
| 2008 | 2007 | ||||
| Assets | |||||
| Current assets | |||||
| Cash and cash equivalents | $9,175,712 | $27,521,625 | |||
| Accounts receivable | 559,788 | 485,590 | |||
| Inventory | 1.696,252 | 765,107 | |||
| Prepaid expenses | 796,453 | 283,028 | |||
| Total current assets | 12,228,205 | 29,055,350 | |||
| Property and equipment, net of accumulated depreciation | 1,254,571 | 1,329,563 | |||
| Total assets | $13,482,776 | $30,384,913 | |||
| Liabilities and Shareholders' Equity | |||||
| Current liabilities | |||||
| Accounts payable | $741,659 | $974,952 | |||
| Accrued liabilities | 935,797 | 2,830,017 | |||
| Deferred revenue | 1,198,992 | 1,605,666 | |||
| Current installments of obligation under a capital lease | 20,339 | 18,462 | |||
| Liability for warrants | 618 | 997,930 | |||
| Total current liabilities | 2,897,405 | 6,427,027 | |||
| Capital lease obligation, excluding current installments | 16,601 | 36,940 | |||
| Total liabilities | 2,914,006 | 6,463,967 | |||
| Shareholders' equity | |||||
| Common stock, $0.001 par, authorised and issued and outstanding 22 million | 22,000 | 22,000 | |||
| Additional paid-in capital | 59,874,782 | 55,818,617 | |||
| Retained deficit | (49,323,817) | (31,919,006) | |||
| Treasury stock of 321,937 (2007: 79,120) common stock $0.001 par. | (4,195) | (665) | |||
| Total shareholders' equity | 10,568,770 | 23,920,946 | |||
| Total liabilities and shareholders' equity | $13,482,776 | $30,384,913 | |||
See accompanying notes to consolidated financial statements
Consolidated Statements of Operations
December 31, 2008 and 2007
| 2008 | 2007 | ||||
| Revenues: | |||||
| Product sales | $1,048,583 | $404,979 | |||
| License and royalty revenue | - | 100,000 | |||
| Collaborative revenue | 4,890,288 | 5,525,037 | |||
| Gross revenues | 5,938,871 | 6,030,016 | |||
| Contra revenues from sales incentives provided in warrants | - | (482,919) | |||
| Net revenue | 5,938,871 | 5,547,097 | |||
| Costs and expenses related to product sales and collaboration revenue | 4,409,089 | 2,439,558 | |||
| Gross profit | 1,529,782 | 3,107,539 | |||
| Costs and expenses: | |||||
| General and administrative | 9,433,492 | 8,139,193 | |||
| Business and development | 6,360,795 | 6,206,324 | |||
| Research and technical development | 4,575,338 | 4,517,300 | |||
| Total cost and expenses | 20,369,625 | 18,862,817 | |||
| Loss from operations | (18,839,843) | (15,755,278) | |||
| Other (income) expense: | |||||
| Interest income | (442,299) | (758,004) | |||
| Interest/other expense | 4,579 | 1,032,859 | |||
| Change in fair value of warrant liabilities | (997,312) | (10,971) | |||
| Loss on extinguishment of liability | - | 518,692 | |||
| Total other (income) expense | (1,435,032) | 782,576 | |||
| Loss before income taxes | (17,404,811) | (16,537,854) | |||
| Income taxes | - | - | |||
| Net loss | $(17,404,811) | $(16,537,854) | |||
| Net loss per common share | |||||
| Basic and diluted | $(0.84) | $(0.84) | |||
| Weighted average number of common shares | |||||
| Basic and diluted | 20,702,527 | 19,756,955 | |||
See accompanying notes to consolidated financial statements
Consolidated Statements of Shareholders' Equity
Years ended December 31, 2008 and 2007
| Common stock | Additional paid-in capital | Retained earnings | Treasury Stock | Total stockholders' equity | ||
| Balances as of December 31, 2006 | $16,256 | $3,383,194 | $(15,381,152) | - | $(11,981,702) | |
| Issuance of shares to settle license liability | 65 | 650,935 | - | - | 651,000 | |
| Issuance of shares, net of offering costs of $7,266,519 of which $1,390,556 represent non-cash warrants issued to underwriters |
5,000 |
42,292,805 |
- |
- |
42,297,805 |
|
| Reclassification of warrants from liability to equity | - | 5,037,000 | - | - | 5,037,000 | |
| Issuance of warrants | - | 482,919 | - | - | 482,919 | |
| Purchase of treasury stock | - | - | - | (665) | (665) | |
| Stock based compensation | 679 | 3,971,764 | - | - | 3,972,443 | |
| Net loss | - | - | (16,537,854) | - | (16,537,854) | |
| Balances as of December 31, 2007 | 22,000 | 55,818,617 | (31,919,006) | (665) |
23,920,946 |
|
| Exchange of note for treasury stock |
(497,297) | (497,297) | ||||
| Proceeds from sale of treasury stock |
(34,666) | 493,767 | 459,101 | |||
| Stock based compensation | - | 4,090,831 | - | - | 4,090,831 | |
| Net loss | - | - | (17,404,811) | - | (17,404,811) | |
| Balances as of December 31, 2008 | $22,000 | $59,874,782 | $(49,323,817) | $(4,195) | $10,568,770 | |
See accompanying notes to consolidated financial statements
Consolidated Statements of Cash Flows
December 31, 2008 and 2007
| 2008 | 2007 | |||||
| Cash flows from operating activities: | ||||||
| Net loss | $(17,404,811) | $(16,537,854) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||
| Depreciation and amortisation | 479,618 | 870,931 | ||||
| Write-off of inventory | 712,293 | 219,180 | ||||
| Provision for a doubtful receivable | 878,697 | - | ||||
| License maintenance fee | - | 100,528 | ||||
| Change in fair value of warrants | (997,312) | 471,948 | ||||
| Amortisation of stock awards | 4,090,831 | 3,972,443 | ||||
| Loss on extinguishment of liability | - | 518,692 | ||||
| Changes in operating assets and liabilities | ||||||
| Accounts receivable | (952,895) | (448,990) | ||||
| Inventory | (1,643,438) | (765,107) | ||||
| Prepaid expenses | (513,425) | (263,032) | ||||
| Accounts payable and accrued liabilities | (2,127,515) | 2,463,765 | ||||
| Accrued license fee | - | (470,000) | ||||
| Deferred revenues | (406,674) | (423,500) | ||||
| Net cash used in operating activities | (17,884,631) | (10,290,996) | ||||
| Cash flows used for investing activities: | ||||||
| Purchase of property and equipment | (404,626) | (851,802) | ||||
| Loan to director | (497,297) | - | ||||
| Net cash used in investing activities | (901,923) | (851,802) | ||||
| Cash flows from financing activities: | ||||||
| Net payments on notes payable to affiliate | - | (6,663,181) | ||||
| Payments made under a capital lease | (18,460) | (16,758) | ||||
| Proceeds from sale of treasury stock | 459,101 | 43,688,361 | ||||
| Treasury stock purchased from employees | - | (665) | ||||
| Net cash provided by financing activities | 440,641 | 37,007,757 | ||||
| Net (decrease) increase in cash | (18,345,913) | 25,864,959 | ||||
| Cash, beginning of year | 27,521,625 | 1,656,666 | ||||
| Cash, end of year | $9,175,712 | $27,521,625 | ||||
| Supplemental disclosures | ||||||
| Cash paid for interest | $ 4,579 | $1,032,859 | ||||
| Cash paid for income taxes | $ - | $ - | ||||
Consolidated Statements of Cash Flows (continued)
December 31, 2008 and 2007
| 2008 | 2007 | ||
| Non-cash investing and financing activities | |||
| The Company received 59,502 shares of treasury stock in settlement of a loan with a Director | $497,297 | $- | |
| The Company issued shares in connection with the settlement of a license liability | $ - | $651,000 | |
| The Company issued warrants in connection with a research and development agreement | $ - | $482,919 | |
| The Company reclassified warrants issued to a vendor and an affiliate to equity | $ - | $5,037,000 | |
| The Company issued warrants in satisfaction of costs incurred to advisors | $ - | $1,390,556 | |
See accompanying notes to consolidated financial statements
Notes
The notes to the results are available in the PDF download.
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